INCOME TAX BENEFIT

Query 1]

I am retiring on 30th June 2010 and my employers are deducting tax on gratuity amount over and above Rs. 3,50,000/- and asking me to get refund from I.T. Department

1. Whether the limit is Rs. 3.50 Lacs or more? Is it Rs. 10 Lacs in some case?

2. When Government New Direct Tax Code will be in force?

What is the rule regarding the exemption/taxability of gratuity. Please elaborate.

[slnayak_52@yahoo.com]

Opinion:

1. Gratuity is taxable on the following basis
2. In the Case of Government Employee [Section 10(10)(i)]:Any death cum retirement gratuity received by an employee f the Central/State Government or Local Authority, is wholly exempt from tax.
3. In the Case of Employee covered by the Payment of Gratuity Act [Section 10(10)(ii)]:
   Any gratuity received by an employee covered by the Payment of Gratuity Act, 1972, is exempt from tax to the extent of
   (i) 15 days salary (7 days in the case of employees of seasonal establishments) based on the salary last drawn for every completed year of service or part thereof in excess of 6 months;
   (ii) Rs. 3,50,000 or
   (iii) gratuity actually received,
   whichever is less.Gratuity in excess of the aforesaid limits is taxable in the hands of the assessee.
4. In the case of any other Employee [Section 10(10)(iii)]:
   Any other gratuity [not covered by a & b above], received by an employee on retirement, death, termination, resignation or on his becoming incapacitated prior to retirement, is exempt from tax to the extent of the least of
   (i) Rs. 10 Lacs for employees retirement/ death etc on or after 24.05.2010 (Prior to 24.05.2010, the maximum amount eligible for deduction u/s 10(10)(iii) was Rs. 3.50 Lacs);
   (ii) half month salary for each completed year of service; or
   (iii) gratuity actually received.
   Gratuity in excess of the aforesaid limits is taxable in the hands of the employee on due or receipts basis.
5. The new Direct tax code in all probability is expected to be implemented from 01.04.2011 & will be applicable to from the financial year 2011-12.

Query 2]

Sir,

1. I am Physically Handicapped Maharashtra Employee. My disability is 40% by Polio. How can I get exemption from Income-Tax & what is the form I have to fill?

2. I have brought a plot at Nagpur on 20^th March & I have Paid Rs. 71,500/- Rs Stamp Duty. Is there any exemption in the Financial year 2009-10 as our Salary Statement is from March 2009 to Feb 2010? [irabokare_mul@yahoo.in]

Opinion:

1. Section 80U of the I.T. Act, 1961 allows a deduction to an individual who is resident and who at any time during the previous year is certified by a medical authority to be a person with disability.
   “Person with Disability” means a person suffering from not less than 40% of any of the disability given below:
   i) blindness
   ii) low vision
   iii) leprosy-cured
   iv) hearing impairment
   v) locomotor disability
   vi) mental retardation
   vii) mental illness
   viii) austim
   ix) cerebral palsy
   x) multiple disability referred to in clauses (a), (c), & (h) of section 2 of the National Trust for welfare of persons with Austim Cerebral Palsy, Mental Retardation & Multiple Disabilities Act-1999.
   Polio leads to locomotor disability & accordingly you can claim deduction u/s 80U. The deduction under this Section is a sum of Rs 50,000/- in normal cases and if the person is suffering from a severe disability (80% or more) then with effect from F.Y. 2009-10, a sum of Rs. 1,00,000/- is allowable as deductions. Depending upon your other income during the year, you can either file the return in ITR-1 or ITR-2.
2. The deduction u/s 80C towards stamp duty & transfer expenses is available only if the same is incurred for purchase of house property and not otherwise. In your case, stamp duty paid for purchase of plot shall not be eligible for deduction u/s 80C.

Query 3]

I am working in Semi-government organization. I have received medical reimbursement from my office for the medical treatment expenditure done on disease related to bone marrow disorder. My office has given Rs. 15,000/- relief and deducted income tax on balance amount. Please let me know medial reimbursement taken for above disease is taxable or otherwise. If exempt, please quote relevant Section & clause /Rule of I.T. Act to file return form.

[vijaybpimpale@yahoo.in]

1. Only reimbursement of medical expenses up to Rs. 15,000/- is exempt from income tax. Amount received over and above Rs. 15,000/- is taxable under the head “Income from Salary”. However, you may examine if the deduction is admissible u/s 80DDB or u/s 80U of the I.T. Act-1961
2. Deduction u/s 80DDB :
   The deduction u/s 80DDB is available if the expenses for the medical treatment of specified disease or ailment is incurred by assessee on himself or on dependant. The specified disease for the purpose of section 80DDB is prescribed in Rule 11DD as under:
   (1) For the purposes of section 80DDB, the following shall be the eligible diseases or ailments :

   (i) Neurological Diseases where the disability level has been certified to be of 40% and above,—
   (a) Dementia ;

   (b) Dystonia Musculorum Deformans ;

   (c) Motor Neuron Disease ;

   (d) Ataxia ;

   (e) Chorea ;

   (f) Hemiballismus ;

   (g) Aphasia ;

   (h) Parkinsons Disease ;

   (ii) Malignant Cancers;

   (iii) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
   (iv) Chronic Renal failure ;
   (v) Hematological disorders :
   (i) Hemophilia ;
   (ii) Thalassaemia.
   

   The amount of deduction allowable under section 80DDB is the expenditure actually incurred or Rs. 40,000/- (Rs. 60,000/- for senior citizen ) whichever is lower.

INCOME TAX BENEFIT

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